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25 Sep 2015

The Zig-Zag method for predicting soil temperature?

Even though Warren Buffet is renowned for making clever picks of businesses to invest in, no-one assumes that he does this all on the basis of some occasional market insight, read in a local newspaper. He probably has some very sophisticated models that are constantly crunching through terabytes of relevant data. The output of the models is not only a record of what has happened but most importantly some powerful insight into what is likely to happen.

The graph on the left is a tool - called the Zig-Zag method - to understand volatility on the Nasdaq. The graph on the lower right is the soil temperature for the past three years over spring for a farm. A surprisingly similar picture.

What struck me most was the zig-zag pattern of soil temperature. Yes the overall trend is to go up (which we all know happens), but it can buck the trend quite markedly along the way making planning difficult.

So it got me thinking – being able to predict soil temperature change for the coming month would be a fantastic insight into what pasture growth rates are likely to be. Having a higher level of certainty about pasture growth rates would make decisions on round length, use of nitrogen or buying supplement so much easier. Getting those decisions right more often than not would lead to higher efficiency – more $$ in the bank.

In the agricultural sector we have got access to loads of data, and access to sophisticated modelling techniques and clever software development. So why not have a crack at predicting soil temperature? I think we will.